We’re back with our monthly multifamily update for July! Our friends at ABODO kindly provided this report where they analyzed the biggest average monthly increases and decreases in rent, the most pricey rental markets, and the state of the market.
Vacancy rates have been down the last few months, while rent has been somewhat volatile in terms of growth and decline. However, 31 states saw average changes in rent price of 1.3%. The biggest increases overall this year include New Orleans, Glendale, Houston, Seattle, and Reno, respectively. In June, Philadelphia was named as the number one city that experienced the greatest growth in rent.
On the other hand, South Carolina, Maine, Vermont, and Rhode Island take the lead in the biggest average monthly increases, respectively. South Carolina and Maine tied at 7.3%, while Rhode Island sat at number 5 at 7%. The greatest average monthly decreases include Utah, Oklahoma, Pennsylvania, and Connecticut, with Utah at -4.4% and Connecticut at -2.3%.
Developers and investors need to be aware of the construction lending concern. Another recession (yikes) might be on the rise, so investors need to be cautious when choosing projects. High costs in construction make it difficult to get the necessary loan in certain areas since lenders are not giving out as much money as they once did. Banks are being meticulous when giving out loans in certain markets. Interest rates have also been rising and multi-lending can be pretty tough due to the excessive demand in multifamily construction.
There are housing shortages in several markets, such as Boston and Seattle, so occupancy rates are high. There are fewer vacancies right now—several major cities at less than 4%, which isn’t very common. The most secure markets regarding apartment vacancies also include New York, San Francisco, and LA. As mentioned before, some landlords offered concessions to potential tenants to secure leases and attract more renters. Specifically in New York City, concessions have been high this past Spring since rental inventory and prices have surged.
Some of the greatest rent increases come as a surprise. In July, Philadelphia and Newark had the greatest rent increases. Philadelphia is essentially affordable compared to other major cities. However, the city of brotherly love actually had one of the greatest hikes in rent this summer. Home values in Philly have increased this year, especially in Center City, South Philly, and Kensington. There were more home sales this year as well, so the market right now is strong and steady in Philly. On another note, Newark had a significant increase in rent from June to July at 10.2% for one-bedrooms. New York City was listed as one of the worst markets for investors when it comes to multifamily investments, and many seem to be commuting to work from Newark to New York to save some money.
When it comes to pricey rental markets, the West Coast is without a doubt on the list. San Francisco, San Jose, and Los Angeles remain on the list, but so do New York City, Washington D.C., Seattle, and Boston. Rent in the West Coast remains high and mostly static. San Franisco sits at the #1 spot of highest rent in the nation at $3,240 a month. Our friends at ABODO commented on the trends in this area:
“When taking a more detailed look at the West Coast, our research shows that San Francisco, San Jose, Los Angeles, Oakland, Seattle, Santa Ana, San Diego, Long Beach, Portland and Denver all appear in the top-20 for the most expensive rental markets in the country.”
Overall, rent in major coveted cities remain high and unchanged, whereas rent in the South continues to grow.